Growing Student Mobility Will Boost Accommodation Sector

The rising number of young people who travel outside of their home country to attend university bodes well for the student accommodation sector in Europe, with the UK one of the main beneficiaries...

The rising number of young people who travel outside of their home country to attend university bodes well for the student accommodation sector in Europe, with the UK one of the main beneficiaries of the trend to enrol on higher education courses abroad. Although Paris was named as the best place to make a student property investment in 2012, London took second spot and was only knocked off the top of the list due to the high cost of living in the city. Other destinations highlighted as good options for investment in the sector were Vienna, Dublin and Barcelona, according to Knight Frank research.

Despite losing its number one ranking, there are still many attractive opportunities in the London market - and the UK as a whole - for those who are willing to look. James Pullan, head of student property at Knight Frank, described the sector as generating "solid and consistent returns throughout every year of the economic downturn", adding this has resulted in high levels of international equity and institutional debt flowing into the market. According to research carried out by the firm, the UK is the second most popular international destination for undergraduates, after the US. In 2010, 12 per cent of all overseas students came to the UK, while 20 per cent chose the US and seven per cent headed to France.

It is this demand from international scholars that is helping support the UK's student accommodation industry, as applications from this demographic will not be affected by the introduction of higher tuition fees. Overseas entrants already pay significantly more than their British counterparts for their education, which means they have not seen any change to how they pay for their courses. In a recent Savills report, head of research at the firm Yolande Barnes commented: "Universities with a track record of attracting high calibre international students will be those catching the eye of investors." Knight Frank agrees with this sentiment, noting it is these establishments that will continue to go from strength to strength. The firm predicted the higher fees will lead to a "flight to quality" among British students, with greater competition for places meaning the standards at the top universities will improve as they have a wider pool of applicants to choose from.

Knight Frank pointed out the highest percentage of non-EU students come from China, accounting for 20 per cent of applicants in this demographic. India is not far behind, with around 14 per cent of the UK's non-EU undergraduates coming from the nation. Nigeria, the US, Malaysia and Hong Kong are among the other main sources of overseas students for British higher education establishments. Within the EU, the greatest demand is from the Republic of Ireland, followed closely by Germany and France. Mr Pullan stated global student mobility is a "long-term trend that is set to continue". He concluded: "This structural shift in the make-up of student populations has significant consequences for cities that play host to the world's best universities, and throws up key opportunities for developers and operators."

Evidence of this trend can be seen in the university application figures for the academic year starting in October 2012, with the organisation pointing out the number of students from Hong Kong seeking a place at a British establishment has climbed 31 per cent year-on-year, while applications from Australia and Malaysia are up by 22 per cent and 13 per cent respectively. Knight Frank suggested student accommodation developers and operators can boost their appeal to international students by creating strong, instantly-recognisable branding.

Citing the hotel industry as an example, the firm recommended investors and developers look closely at how to differentiate their brand from the others on the market, whether this is due to cost, quality or both. The company concluded the aim would be to "create product differentiation around varying price points, which we believe would only enhance the chances of achieving full occupancy with greater lettings velocity". Savills recently noted in its Spotlight on Student Housing report that global marketing by accommodation providers will be one of several factors that could result in greater numbers of international students coming to the UK. Other things that will influence the sector include British universities' own marketing to this wider demographic, as well as wealth creation in developing countries that enables people to send their children to educational establishments overseas.

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